“Most consensus forecasts were wrong, often substantially. And although consensus forecasts improved over time as more information became available, accuracy remained an issue several years post-launch.”

And when the researchers say “substantial,” they mean substantial. “A significant number (53) of consensus forecasts were overly optimistic by more than 160% of the actual peak revenue of the product.”

If nothing else, let this be a reminder to all of us to 1) take any expectations we have about a biotech’s potential and 2) slash it in half – immediately.

Getting back to the matter of a biotech bubble, average valuations certainly appear frothy.

The IBB fund trades at a price-to-earnings ratio of 44.1 and a price-to-book ratio of 11.23, which compares to 18.0 and 2.6 for the S&P 500 Index, respectively.

So there certainly could be more bloodletting ahead. But only time will tell whether or not the 15% pullback for the sector since February 25 represents the beginning of the end, or just another breather before the next upward charge.

My take? If you’re sitting on profits in the sector, protect them with trailing stops. It’s better to be safe than sorry.

Don’t Sweat the Little Stuff

If you’re not invested in any biotech stocks, it’s only natural to still be concerned that a nasty downturn in the sector could end up sinking the entire stock market.

Fight your instincts! It’s not a legitimate concern.

Although investments in biotech stocks might represent a good measuring stick for investors’ appetite for speculation, the sector’s significance in the big picture is minimal at best.

Or, as Howard Silverblatt of S&P Dow Jones Indices notes, the market cap of the S&P biotech industry is only equal to about 2.4% of the entire market cap of the S&P 500.

Granted, that’s swelled noticeably from the 0.4% level during the height of the 1999/2000 bubble. But it’s still too small to matter much.

Put simply, even if the biotech sector disappeared completely, 97.6% of the S&P 500 would remain intact. And the overall impact on performance would be minimal.

Bottom line: We can’t be certain whether or not the impressive bull run for biotech stocks is officially over. One thing we can be certain about, though, is that no matter what happens next with biotech stocks, it won’t unduly impact the broad market.

Donald Trump ran a campaign on hyperbole and vagueness. Now as he prepares to take office, we take a closer look at his contradictory statements on science to make sense of the future of our favored industries.

It’s easy to dismiss celebrities and politicians as having hidden agendas. On the other hand, scientists that uncover cold, hard facts, deserve our respect for their endeavors. But respect is not worship.